Redrow builds hope for future

Shares in housebuilder Redrow rose by more than 6% today as the company said it was starting work again on mothballed developments.

The company said it had been encouraged by sales activity since the start of the year as the picture improves for the battered housing market.

"We have remained tightly focused upon reducing work in progress to appropriate levels for the prevailing environment," Redrow said in a trading update.

"With sales volumes in the housing market seeming to have stabilised, we are recommencing construction on certain developments and starting new sites from our existing land bank.

"Interest in the land market generally is re-emerging though the number of transactions actually being completed remains relatively low.

"We will pursue such opportunities carefully with a focus on Redrow's historic competitive strength of traditional family housing."

The group is reducing the number of apartments and three storey houses it is planning to allow it to focus on family housing.

Redrow reported that sales rates at its outlets since the start of the year were ahead of the same period last year, although it now has 16% fewer of these outlets.

"Pricing remains fragile though the pace of house price falls has abated in recent months," the group added.

The company said the amount of unsold housing stock had reduced significantly over the past twelve months, stabilising the market.

However, the market would remain "challenging" into 2010, because of the recession and the difficulty people faced getting mortgages.

Shares in the FTSE 250 company rose more than 6% to 196p, although some analysts urged caution.

"From a volume perspective, there are some encouraging signs but prices remain under pressure and the margin outlook looks weak in the short to medium term," wrote Panmure analysts Mark Hughes and Rachael Waring.

"The housing market remains in a fragile condition in our view and therefore we maintain our sell recommendation and 158p target price."

The FTSE 100 has made an undramatic start to the day and is up 16.24 points at 4451.74.